Making the Bailout Less Toxic

The initial failure to pass bailout legislation reflected a political system as bereft of confidence as the financial markets.

President George W. Bush and Treasury Secretary Henry Paulson had no credibility to match the arrogance of their initial demand for absolute power in distributing $700 billion of public assistance (the old synonym for welfare). Many Republicans in Congress lacked the intellectual fortitude to cope with the spectacular collapse of their ideology.

So the rescue of capitalism once more becomes the sole responsibility of the Democrats. Much can be said about the Democratic congressional leadership's fumbling and fearfulness, which have hobbled them ever since they recaptured the majority. Well meaning as they may be, Nancy Pelosi and Harry Reid bear no comparison to the likes of Tip O'Neill or Lyndon Johnson. But just weeks before a national election, their reluctance to back the unpopular bailout proposed by the Bush White House without substantial support from congressional Republicans was perfectly understandable.

Facing a crisis that Secretary Paulson had outlined in the starkest terms, with his warnings echoed by the Federal Reserve's chairman, Ben Bernanke, the Democrats tried in good faith to negotiate bipartisan legislation as quickly and prudently as possible. They had no more certainty than their critics that following regular order would not plunge the world economy into profound recession or worse.

When that effort failed by a dozen votes, the Republicans strained credulity by blaming Pelosi, who had uttered a few hard and truthful (if politically unhelpful) words on the House floor. (Will the members who voted no because the speaker hurt their feelings step forward to prove that their leaders are right? Didn't think so.) More likely, the dissident members of the minority were simply unable to abandon the dogma that brought them into public life, no matter how compelling the evidence of its hollowness. And like everyone on Capitol Hill, the Republicans feared the rage of their constituents who no longer care to subsidize incompetent government and corporate misconduct.

Bring Back the Dissenters

As the Democratic leaders returned to the drawing board over the next few days, they ought to have realized that broad bipartisanship cannot be the guiding purpose of their choices from now on. They would have done better by bringing back the dissenters on their side of the aisle, who could not tolerate the paper-thin protections for the ordinary taxpayer and working family in the bill they voted to reject. Unlike the Republicans who joined them to vote it down, most of the Democrats understand that the financial system desperately needs fresh liquidityand that only the federal government can make those funds available in time.

What might have brought back enough of the Democratic dissidents to ensure passage of a new bill? Certainly the Republican proposals for new forms of government financial insurance and lower capital gains taxes are beside the point. Placating the confused, dispirited conservatives will only alienate the progressives who have resisted the Paulson plan so far.

Instead the Congressional leaders should have restored and strengthened the provisions stripped from the original bill, providing new protections for homeowners and new protections against speculators and predatory executives. Rescuing the families who face foreclosure is just as urgent in economic terms as saving the financial institutions in fact, they are obviously complementary and is also preferable both morally and politically. A publicly financed homeowners-loan corporation, like the agency that helped millions of families during the Great Depression, would be one means to accomplish that purpose.

Then, as New York University economist Nouriel Roubini and many of his colleagues have suggested, Congress should consider smarter ways to inject money into the banks, including the Scandinavian solution of direct government acquisition of preferred equity. Perhaps the Treasury will have to buy some of the toxic bundled mortgages right away, but a combination of measures designed to benefit taxpayers on the upside of the cycle is essential.

Such measures can only prevent the worst consequences of the recession that is already here. If the Republicans would reject them, so be it; the Democratic majority should instead pass a new and improved bill and send it to the president. He would sign it rather than leave office with the world in economic shambles.

Should the Democrats need encouragement, they need only to look at the latest polls. Voters distrust both the White House and Wall Street, but want action in the public interest. As the Chinese say, while they review our mounting debt, a crisis is also an opportunity.

The show is on Friday, July 24th at Stonefly not t...

Good catch; corrected!...

PETA ... People eating tasty animals. Mmmmmmmmmm....

PETA ... People eating tasty animals. Mmmmmmmmmm.

Mediumraremore than 9 years ago

If the Wall Street bailout was hard to swallow, ...

If the Wall Street bailout was hard to swallow, the government is preparing a
Halloween trick that just may be impossible to stomach.
The Food and Drug Administration is opening the way for grocery stores to sell
food made from genetically engineered animals. And the agency is proposing that
these products, called “Frankenfoods” by some, be sold to you without your
knowledge.
Sign our online petition demanding that food from genetically engineered animals
be labeled. We have the right to know what we are eating!
Genetically engineered animals are not a far-off, exotic concept. It’s happening
right now. Goats are engineered with spider genes to produce silk in their milk.
And pigs carry mouse and bacterial DNA to improve their digestion.
The jury is still out on whether food from these animals is safe for humans or
the environment. And the ethics of such changes have yet to be considered.
The FDA says they will conduct a safety review before these foods can be sold
for human consumption. But consumers won’t know if they’re buying genetically
engineered food, because the agency isn’t going to require a label.
We know what’s in the can of soup we buy because the label tells us. Shouldn’t
we know if the meat we buy comes from a pig with another animal’s genes, or
whether our milk has insect DNA in it?
Sign our petition and show the FDA that Americans want to know what’s in their
food!
We have until Nov. 18 to collect signatures. Please forward this email on to
others so they can sign too. Let’s stop this Halloween trick before it starts.
Sincerely,
Jean Halloran
NotInMyFood.org

Jean Halloranmore than 9 years ago

AIG canceled a half a million dollar retreat for t...

AIG canceled a half a million dollar retreat for their VIPs. Good for them. This is the type of thing for which I'm looking for answers. We're bailing out people that live high off the hog and will continue to do so long after our kids inherit the debt. When are we going to take action? When are we going to get off our inert butts? As they aptly said in the film "Network," I'm mad as hell, and I'm not going to take it anymore. Today I called Feingold's office, Sensenbrenner's office, to inquire about this very thing....the fat cats living large off of their mistakes and our bailout. We're probably just going to take it and say thank you.

BRAVO...

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